Episode #5 – Beauty is Trending

 
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Retail Ramblings Podcast

Episode #5 – Beauty is Trending

Episode Highlights:

  • Retail winners. This week’s retail winners are Compact Power Equipment Inc. and Covergirl. We explore how these retail brands are growing their footprints and setting themselves apart from the competition.
  • Retail losers. We take a look at this week’s retail losers, which include Sears, Kenmore Appliances, and Revlon. We provide commentary around what these well-known retail brands can be doing to bounce back after some disappointing announcements.
  • The retail roadmap. We discuss the latest trends dictating the future of retail.
  • Data dive. We talk about some interesting uses of data, and show how big data can have some unintended consequences.

Listen to Episode 5: Beauty is Trending

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Show Notes


Retail Winners & Losers

Winner: Compact Power Equipment Inc.

  • They provide equipment rental and maintenance services across the U.S
  • Equipment rental is main competency
  • Purchasing tools for every single maintenance job can become a costly procedure
  • Compact Power Equipment give the pro and DIY shopper the ability to simply rent
  • Been in partnership with THD since 2009
  • Started at 3 pilot stores that now extends to over 1000 stores
  • Short and long-term rentals for construction as well as landscape equipment to Home Depot’s Pro customers
  • Home depot inked a $265 mil deal to purchase the company based out of Fort Mill, South Carolina
  • One of very few acquisitions by The Home Depot in recent years
  • North America
  • Over 1,000 THD stores
  • Shows The Home Depot’s continued focus on the ‘pro’ segment as well as your DIY customers.
  • Investing in capabilities that serve its core customers. Understanding that their service extends beyond being a simple retailer
  • Customer experience is a priority which is enhanced through more product options
  • Winner because of how
  • Lowe’s made a similar purchase of Maintenance Supply Headquarters in May in an effort to expand their pro customer base
  • For Lowe’s, Pro’s make up a small portion of their customer base, but the pro business is growing much faster than your general DIY customer.
  • Built for multifamily building industry
  • Indicative of the intense competition between Lowe’s and THD
  • “invest in capabilities that uniquely served its core customers”
  • Customer experience is becoming the battleground for these brands
  • Rental market is set to expand globally
  • Home Depot Buys Power Equipment Company for $265M
  • Home Depot’s (HD) Compact Power Buy to Boost Rental Business
  • Lowe’s buys Houston company for $512 million, aiming to win more pro customers
  • Home Depot Ramps Up Tool Rentals In Acquisition Deal
  • Compact Power Equipment Rental Market Size to Grow at a Steady Rate During Forecast 2014 – 2020

Loser – Sears and Kenmore Appliances

    • A partnership to sell Kenmore appliances on Amazon could add new sales for Sears and expand Amazon’s appliance ambitions. But will Amazon shoppers flock to a brand some say is dying?
    • In response to the announcement, shares of Home Depot, Lowes and other appliance retailers fell.
    • Under the terms of the deal, Sears will sell Kenmore, Kenmore Pro and Kenmore Elite refrigerators, Alexa-enabled ACs and other smart appliances direct to Amazon. The e-tailer will own the inventory but will lean on Sears’s in-house Home Services unit and Innovel Solutions subsidiary for delivery, installation and extended service support.
    • Ultimately, the move may prove to be a mere stop-gap measure as the retailer wends its way toward bankruptcy.

  • “Let’s not dance around it, Sears Holdings Corp. is an utter disaster despite its new appliance deal with Amazon.”
  • Selling Kenmore appliances through the largest e-commerce platform in the country is certain to expose Sears to a larger and broader audience for the brand. Sears noted at the time of the announcement that the Amazon partnership was the first of its kind and represented the widest distribution of Kenmore outside of Sears’s own stores and websites.

  • “Just because Kenmore is available on Amazon doesn’t mean customers are going to want this dying brand anymore than they do now, especially as news of Sears’ future grows more negative and the industry moves toward more smart appliances, hence giving customers more options beyond Alexa.
  • If the deal is unlikely to kill off the appliance heavies in the retail world, it’s not likely to be Sears’ salvation either, given the company’s deep and well-documented financial concerns.
  • Sears still needs $2 billion of liquidity annually to survive as a going concern. “With regard to the overall credit story, we don’t think this is a game changer or a material change in any way,” “It’s obviously a positive step for them to find this type of partnership, but in and of itself it’s not a material game changer in the overall Sears story.”
  • And while Sears could boost sales of the Kenmore brand through the Amazon deal, the retailer runs the risk of cannibalizing sales from its stores. “Is every sale they do Amazon potentially taking market share from someone else, or is it a sale they would have done out of their own store anyway, and potentially less lucrative because Amazon takes a piece of that?” Silverman said.
  • But the Amazon pact is a dual-edged sword. While on-site sales will certainly boost Kenmore’s profile – particularly among a millennial crowd that doesn’t frequent Sears – it also gives consumers one less reason to visit its stores.
  • Sears’ Amazon deal is too little, too late
  • Amazon-Kenmore Deal Portends Rough Seas For Sears … And The Appliance Biz

Cosmetics

Winner: Covergirl

  • American based cosmetics brand
  • based in Maryland
  • Owned in large part by Coty
  • Competes with Maybelline and other large scale cosmetics brands
  • Wide range of products
  • Beauty Product Loyalty report by Corra.com
  • Corra = digital commerce agency creating unified customer experiences for fashion, lifestyle, and beauty
  • Compiled by their research wing
  • Covergirl has the most loyal consumer base out of all major cosmetics brands
  • Consistent across different segments of Millennials, Generation X and Baby Boomers
  • Nearly half of their customers surveyed in this poll of around 1000 cosmetics users over the age of 18 have been using Covergirl for 5 or more years
  • Study goes on to outline their most popular products are makeup inclusive of:
    • Blush/Bronzer
    • Foundation
    • Powder
    • Concealer
  • Can cost 7 times as much to source a new customer to foster an existing relationship with a current customer
  • Brands are working more aggressively to get ‘cult’ followings
  • Correlation between loyalty and usage levels
  • Affordable brands available for purchase at non-specialty stores came out on top over high-end offerings
  • drugstore brands came out as the most desired amongst buyers, with millennial consumers listing CoverGirl, Maybelline and Neutrogena as the top three favourite brands thanks to their budget price tag and efficacious formulas
  • Premium brands struggled
    • Yves Saint Laurent and Chanel some of the worst performers
  • 38% of respondents say loyalty comes from superior products.
  • 30% say loyalty comes from using their brand for a long time
  • 69.3% of customers who are loyal are likely to recommend to friends
  • 12.0% will leave brand reviews
  • 6.7% will leave social media content
  • Impact for covergirl’s growth strategy is immense.
  • Covergirl has a focus on diversity, resonating with customers
  • Generally have their finger on the pulse in terms of products
  • Quality is the most important factor amongst all else.
  • Another independent study showed that only 7% of recent cosmetics purchases were made without the influence from some sort of beauty blogger
  • Insinuates Cover Girl’s products are superior to that of their competitors
  • Study also shows that women are less likely to try new products frequently, making loyalty all the more important
  • Millennials buck this trend, and are the least loyal and the most inclined to change products

Revlon

  • Revlon has announced its results for the second quarter of the financial year:
  • Net sales were down 3.9 percent (XFX) on a pro forma basis to US$645.7 million. Adjusted EBIDTA also fell sharply, decreasing 32.7 percent
  • Driven by net sales declines in North America and decline in mall and department-store traffic.
  • “While our financial performance and sales results in the US remained soft in a challenging retail environment, we are encouraged by the global growth of our iconic Revlon and Elizabeth Arden brands, our international sales which remain robust and the key strategic initiatives that we have implemented during the quarter, which we expect will drive sequential improvements in company performance,” said Revlon President and CEO Fabian Garcia.
  • Revlon is focusing its global expansion on large and fast-growing geographies, developing a strong product pipeline for the second half and is continuing to make progress in digital communications and e-commerce.
  • Revlon is on course to deliver US$50 to US$60 million in synergies over the year, with US$24 million achieved in the first half
  • Revlon second quarter: sales down 3.9 percent to US$645.7 million

The Retail Roadmap

Collecting Data in Retail Fitting Rooms

No part of the customer journey is safe from data collecting — not even the fitting room!

  • In a brutal retail landscape cast in Amazon’s ever-expanding shadow, brands’ ability to gather, understand and react to customer-driven data has hit a do-or-die point of urgency
  • What’s most important for retailers when using data and technology to interact with customers is that they actually respond to what customers want and don’t want
  • Every time a customer comes in and out of the fitting room, they’re demonstrating a choice about a brand’s product
  • So, fitting rooms are evolving past poorly lit mirrored closets and transforming into critical data touch points. By tracking the movement of in-store products using RFID technology and scanning systems, brands and retailers can follow item-by-item performance to make decisions
  • If something never goes into the dressing room, or if it doesn’t convert, it’s an indicator to stop putting that out.
  • If there’s something that converts really well, a retailer should be promoting that item. The floor serves as a place for intelligent customer product suggestions.
  • In its fitting rooms, Reformation has screens that display what’s being tried on, and lets customers alert staff that they’d like to try a different size and color.
  • For brands looking to mine customer data from the fitting rooms, customer-facing tech also plays a role: Rebecca Minkoff and Ralph Lauren have both experimented with the same smart-mirror technology from Oak Labs that, using RFID tags.
  • Instantly recognizes what items are in the fitting room when a customer enters. From there, customers can browse other colors, sizes, and what suggested items go with those products.
  • They can also change the lighting of the fitting room for a better view.
  • The better experience someone has in the fitting room, the more likely they are to buy.
  • At the same time, brands can keep an eye on specific items: If something keeps going into the fitting room and not getting purchased, it signals that something’s wrong.
  • Omnichannel implications: Opens up flow of communication between online and in-store. For example, Online athletic brand Fabletics, which operates on a membership model, lets customers leave items they’re unsure about in their shopping carts online in order to come back to them later. That data is then used to retarget customers based on their in-store interests.
  • Retailers aren’t tech organizations. Amazon has 18 years of data profiling and reacting on it.
  • It’s scalable, but retailers and brands need to position themselves to be able to pivot on a daily basis in reaction to this data
  • For brands, fitting rooms are the key to unlocking valuable customer data

Data dive

Cloverleaf and their use of shelfPoint technology

  • Affectiva software determines emotional reactions
  • Want to discuss shelfPoint
  • LCD display strips mounted across an entire store shelf face
  • Changes content to entice consumers with more product specific content
  • Bases the decision of what to show on eye movement
  • Gauge reactions, reactions in real time to sales, end caps etc.
  • Based on 40 different facial attributes ranging from liftings of the eyebrows to wrinkling of the lips
  • Also measures consumer reaction, age, and ethnicity
  • Measures how long people hang around a certain shelf. Indicative of which product categories are higher effort and lower effort
  • Tested with P&G in their concept stores in Beckett Ridge Innovation Center, double digit sales uplift (around 40%)
  • Powered by AI to make judgement on what a consumer is reflecting through facial expressions
  • Placed in high traffic areas to boost the sale of high-margin items or impulse purchases (we want to attract their attention, cause them to turn their head)
  • The display also records facial characteristics to recognize if a person returns to the shelf within 24 hours
  • In store shopping, particularly in grocery and convenience stores are ripe for disruption
  • Not a lot of innovation happening in those spaces
  • With the addition of Amazon in grocery, the industry is about to enter a phase of hyper-competitiveness and require an increased push for innovation
  • People shop at eye-level
  • Screens, atm, are located above eye-level
  • Space that is ripe for innovation
  • Repercussions for brands
    • Allows marketers to change their offering on the fly (particularly if a consumer is displeased)
    • Allows them to access in store data
    • This is going to become increasingly important.
    • The best retailers we’ve seen already share data in a multitude of different areas, such as POS. This looks prior to point of sale and allows marketers to paint the entire customer journey through data and insight
    • Allow to sell multiple products at once
    • Different product combinations
    • A/B testing (down to the point based on reactions (were there more positive or negative reactions)). Sales isn’t necessarily the only repercussion
  • Trust plays a big part. Consumers are more likely to trust digital advertising because it is perceived to be connected to POS and therefore be up to date
  • Indicative of a more integrated, holistic retail environment where retailers and brands are working in tandem
  • brands with impulse buy-potential, ie: health and beauty, snacks and drinks, cleaning products, will perform best
  • They are also effective at articulating a value proposition and possibly creating larger purchases than shoppers had planned. At the moment, it’s pretty complex to install these systems, so end caps make the most sense
  • Cognitively, people are inured to the large amounts of static information around them,” Gownder said. “By adding digital, in-motion information, the sign stands out in a sea of same-ness.”
  • Repercussion for Cloverleaf who will control all the data and subsequently use the data to help inform brands on different demographics and segments are their own product inclinations
  • Great soundbite: “The more robust information that we can provide,” he said, “companies like P&G say give me as much as you can, because it’s information they don’t have today.”
  • Particular repercussion for CPG and FMGC
    • Tastes and brand loyalties seem to change on a whim
    • Campaigns the ability to act and react in a marketplace where nimbleness is rewarded and complacency condemned to the faceless masses of a hypercompetitive industry
  • FMCG companies are inherently more reliant on old-fashioned models like shelf space and end caps in markets
  • The combination of big data and AI-powered algorithms can provide the immediacy needed to mold a campaign around such a rapidly changing customer base
  • Artificial Intelligence is Here: 5 Brands Implementing AI
  • P&G Tests AI-Powered Shelf Displays That Track And Analyze Customers
  • Success Story: shelfPoint
  • Will Smart LCD Shelving Strips Revolutionize Retail?
  • Procter & Gamble ‘Reads’ Facial Expressions of Shoppers And Then Adjusts Ad Displays
  • This device from Cloverleaf and Affectiva tracks your emotional reaction to products while shopping
  • Nimble AI Natural Fit Dynamic FMCG Market

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9 episodes available. A new episode about every 10 days .